Best Special Report Spots Insurance Market Rebound, Growth in Mexico

February 13, 2012

A special report from A.M. Best Co. concludes that “competitive pressures will continue for Mexico’s insurers as they look to build on the industry’s low penetration level and tap a growing middle class segment. Small amounts of growth anticipated across the life and non-life segments will be driven in part by pricing, and tempered by a lack of consumer demand for more sophisticated products.”

Best also points out that “Mexico is the second largest insurance market in the Latin American region—behind Brazil—with a growth profile defined by a relatively low level of coverage penetration at 1.8 percent of the country’s gross domestic product.

“While the life segment seemingly holds more potential for premium growth, its capital-intensive nature will prove challenging for some domestic carriers amid strong competition from foreign-owned subsidiaries that dominate the segment.”

The Mexican market has historically featured close ties between the banking and insurance sectors, which Best foresees continuing, and even gaining “more strategic importance as competition escalates in bancassurance and other channels.”

“Online sales have grown and future marketing efforts will target even more consumers at retail venues, driving a competitive need for value-added product delivery.

“Underwriting losses in key business segments and a reliance on investment income will place moderate pressure on capitalization levels for some domestic carriers and may hinder their ability to compete with foreign-owned subsidiaries.”

Source: A.M. Best

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